A “toxic combination” of low productivity and a failure to narrow the gap between rich and poor has resulted in a widening prosperity gap with France, Germany, Australia, Canada and the Netherlands, the Resolution Foundation report says. The thinktank said that if the UK matched the average income and levels of inequality of these countries, typical household incomes in Britain would be a third higher and those of the poorest households two-fifths higher. Income inequality – graph Its chief executive, Torsten Bell, said: “Britain is a rich country, with huge economic and cultural strengths. But these advantages are not building on the recent record low growth that has left Britain behind its peers. “This forms a toxic combination with the UK’s high inequality, leaving low and middle income households far poorer than their counterparts in similar countries. “We need to turn this around, but we are not on track to do so. We underestimate the scale of our relative decline and are far from serious about the nature of our economy or the scale of change required to make a difference. This has to change.” The foundation’s report – Stagnation Nation – coincided with calls from the Confederation of British Industry (CBI) and the Treasury select committee for the government to produce a coherent growth strategy. In an open letter to ministers, CBI director-general Tony Dunker hit out at the tax cut bidding war being waged by Tory candidates to replace Boris Johnson, urging candidates to show how growth policy was “about That”. The primary goal of tax policy right now should be to boost business investment, the business lobby group added. “Growth based only on government or household consumption is doomed to failure, especially in an era of rising inflation and high debt.” Median household income – chart Dunker said the economy could be boosted by £700 billion over the next decade, provided the government developed “serious, credible and bold” growth policies. “There are awards on offer through decarbonisation, innovation, trade, thriving regions, employment and health. And these rewards can be realized if the government pulls four key growth drivers: smart taxation to unlock investment; creating a workforce for the future; catalyzing public investment; and creating markets to outperform the world’s competition.” Meanwhile, the Treasury’s cross-party committee expressed concern about “cut and change” in the government’s economic approach, warning of a risk of fragmentation and a lack of long-term thinking after scrapping its industrial strategy and replacing it with the plan for growth. It was unclear how the plan for the development was an improvement over its predecessor, the report said. Mel Strid, chairman of the committee, said: “We have a new chancellor and we will soon have a new prime minister. Controlling productivity will be key to kick-starting economic growth and stimulating greater business investment in the UK. The evidence we received suggests that there needs to be greater stability and long-term certainty in government policy-making.” Subscribe to the Business Today daily email or follow Guardian Business on Twitter @BusinessDesk The Resolution Foundation said the UK had closed the productivity gap with France and Germany in the 1990s and the first half of the 2000s, but since then the gap had widened from 6% to 16% – the equivalent of 3,700 pounds per person. While the top 10% of households in Britain were richer than in many other European countries, middle-income British households were 9% poorer than their counterparts in France, while the poorest fifth of households in Britain were more than 20% poorer than Equivalent French and German. Meanwhile, the latest monthly confidence barometer from YouGov and the Center for Economic and Business Research shows that weak growth and rising inflation in recent months have led to a seventh consecutive fall in consumer confidence.
